Momentum Indicator

Momentum Indicator

The momentum indicator provides deep insights into the market trends. Determines potential buy-sell signals & price divergences. Suits forex and stocks trading

The Momentum is a technical indicator used to identify the bullish and bearish force behind price trends. So, even if you don’t do the trend analysis, you can still predict the upcoming trend directions by using this super MT4 momentum indicator.

Generally, the trend-based indicators show the current trend conditions only. The signals produced by such tools are determined based on the changes in price actions. However, it doesn’t portray the market sentiment. The sentiment analysis gives us an overview of the buy/sell pressure underlying an asset. Besides trend directions, It helps us to anticipate the strength and weaknesses of the upcoming market movement.

One key target of the momentum indicator is to keep traders aware of the changes in market sentiments. Additionally, it works on all timeframes and supports both forex and stocks charts.

How to use the Momentum indicator for determining buy-sell signals in MT4
This indicator applies a 14-period moving average system for examining the price momentums. Its value rises above 100 suggests the possibility of an upcoming bullish move of the price. Conversely, the value drops below 100 to signal a bearish movement.

Besides, it also discovers hidden divergence setups. A divergence occurs when the price and the momentum curve move in an opposite direction. For instance, the price closes in a higher low. At the exact moment, the indicator level creates a lower low. According to the generally accepted rule, it is a bullish divergence. It addresses the market is approaching a possible bullish trend-reversal soon.

As you can see in the above image, the hourly candles of GBPUSD closed in a higher low position. In the meantime, the indicator level found a new low below the 100 level, confirming a bullish divergence. Next, the indicator value rebounds above 100 to signal a bullish momentum. As per the buy/sell rule of the indicator, we could trigger a buy order right after its value passed above 100.

When you’re looking for a selling opportunity, make sure the indicator line moves below 100. After the indicator signals a bearish momentum, look for other price action signals to go for a short entry. In this case, you may look for a bearish divergence to confirm a sell order. For a bearish divergence, the price needs to make a lower high while the indicator levels move to a new high.

Conclusion
The momentum indicator offers excellent support for technical traders in revealing the background scenario of any market conditions. Besides delivering the momentum signals, it also helps to spot and pick the potential divergence setups. This tool enables beginners to explore and test the market momentum like an experienced professional. Besides, you can add it to any day trading or intraday trading strategy for boosting your trading performance.